Kroger's Improved Analytic Capabilities Powers Merchandising Decisions

Kroger is leveraging its new in-house analytics team, 84.51°, to gain insights into shopper behavior and trends and is using that data to make merchandising decisions.

In spring 2015, Kroger acquired the technology assets of Dunnhumby, and the talent that runs it. Those 500 employees now work for a wholly owned Kroger unit called 84.51°. Prior to the acquisition Kroger co-owned the company with Tesco.

"To me the biggest improvement and change has been in the meetings now," Kroger EVP and CFO J. Michael Schlotman said on a recent earnings call with investors and analysts. "The 84.51 team is part of the same meeting. So you're not having a discussion and deciding what to do and then going back and sitting down with 84.51 to say, okay, here's what we want you to do. It's actually everybody in the same meeting and their insights to say, you're thinking about this but it's probably better if you think about it this way. And it's really the professional insights and experiences that's helping us accelerate where we are versus necessarily just doing something new."

One key area where the in-house analytics team is being leveraged is in analyzing consumer behavior and predicting demand. As the healthy and organic craze moves from the buzz and niche phase to an established long-term trend, mega grocers like Kroger are quickly joining the likes of Whole Foods and Trader Joes and offering healthier food options to meet rising demand.  

"We certainly do a lot of predictive analytics with data we see not just inside our stores but overall in the economy, trying to figure out where the consumer is going," Schlotman said. "It clearly does seem as though there's going to be persistence and shift to a more healthy lifestyle and maybe out of some of the traditional center-of-the-store categories into more fresh categories."
In typical Kroger style they are not just following the trend but setting the pace. The grocer not only sells natural and organic products but has its own store brand Simple Truth dedicated to providing healthy food options.

"We continue to see outstanding, double-digit identical sales growth in our natural foods department," Schlotman said. "Simple Truth continues to grow at an astonishing rate, setting a record high for total sales in the third quarter, while continuing to establish all-time weekly sales records throughout the quarter. When you look at the strength of brands like Simple Truth, when you look at the strength of natural and organics, all of which have a little bit higher gross margin, that certainly plays into the overall mix of business."

Kroger's commitment to providing its customers with the products and services they demand has helped position the supermarket chain as one of the world's biggest and most profitable grocers. For the 48th consecutive quarter the chain posted positive identical supermarket sales growth with a sales bump of 5.4% in Q3 2015.

Kroger and 84.51 will share high-level strategies and actionable insights on how to use customer science and analytics to create authentic and lasting customer relationships during the "Getting Personal Through Customer Science" session at NRF's Big Show 2016. Don't miss this session where Matthew Thompson, VP, Digital Business, The Kroger Co., and Yael Cosset, CIO, 84.51, will explore how putting the customer at the center of every decision makes their lives easier and casues them to reward you with their loyalty. 

Click here for RIS News' annual look at the must-see sessions at retail's biggest event of the year.